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Irish economic strength is music to the ears of Dalata Hotel
We are attracted to Irish operator Dalata Hotel (DAL) as it is rolling out new rooms just as the Irish economy is in full bloom.
Ireland’s GDP is forecast to grow by 5.7% in 2018 and by 4.5% in 2019, according to stockbroker Davy. It believes consumer spending will grow by 3.2% and 3% over those two respective years. Essentially it is a great time for Dalata to be in business.
WHAT DOES THE COMPANY DO?
Dalata operates the Maldron Hotel and Clayton Hotel brands in Ireland and the UK, as well as a portfolio of partner hotels. Its estate consists of three and four star hotels and it owns property assets valued at €1bn (£0.88bn).
The hotel operator achieved a 10.4% increase to €88.51 in revenue per available room (RevPAR) in the year to 31 December 2017.
In late February 2018 Dalata said trading was ‘marginally ahead’ of expectations in the first quarter, prompting Investec analyst Ronan Dunphy to increase his RevPAR forecasts for the year as a whole.
Dunphy’s RevPAR growth estimates for Dalata’s hotels in Dublin have been increased from 5% to 6% and hiked from 4% to 6% for regional Ireland in 2018. In the UK, RevPAR growth is anticipated to hit 3%, previously estimated to be 2%.
Playing to Dalata’s favour is the fact that Dublin hasn’t seen large amounts of investment in its hotels industry over the past decade, so isn’t suffering from overcapacity as the economy picks up.
Occupancy in Dublin last year was among the highest in Europe and much of the new supply in 2018 is coming from Dalata itself.
Overall Dalata has a pipeline of 2,200 rooms. Five new hotels and four major hotel extensions are under construction. Four new hotels are in the planning process.
HOW MUCH MONEY DOES IT MAKE?
Pre-tax profit is expected to rise by 11.9% in 2018 to €86.5m and further increase to €93.5m in 2019 before hitting nearly €100m in 2020 according to Investec forecasts.
One of most encouraging signs for Dalata’s outlook is its decision to start paying a dividend this year. According to Investec’s estimates, investors could expect a dividend of 9.3c in 2018. That equates to 8.17p on current exchange rates and implies a 1.4% yield.
The yield is expected to be more generous in the future given that analysts anticipate the dividend to more than double to 20.1c in 2019 and increase to 21.4c the year after. (LMJ)